This paper presents the results of a set of experiments performed to test the properties of a bargaining mechanism (called the sealed-bid mechanism) used to structure bargaining under incomplete information. Our results indicate that the mechanism performs quite well. When using it, experimental subjects are able to capture a large portion of the potential gains from trade. In addition, the behavior of the subjects is qualitatively consistent with one particular equilibrium of the mechanism, namely, the one with linear bidding strategies. Finally, an experiment performed allowing experienced subjects to repeat the experiment for relatively large numbers of rounds, suggests that, with enough experience, other equilibria may appear, in which the subjects use "step function" strategies.
ASJC Scopus subject areas
- Economics and Econometrics